How many educated workers for your economy? European targets, optimal public spending, and labor market impact

Isabelle Lebon (1) , Thérèse Rebière (2)

1 CREM - Centre de recherche en économie et management
2 LIRSA - Laboratoire interdisciplinaire de recherche en sciences de l'action

This paper studies optimal taxation schemes for education in a search-matching model where the labor market is divided between a high-skill and a low-skill sector. Two public policy targets - maximizing the total employment level and optimizing the social surplus - are studied according to three different public taxation strategies. We calibrate our model using evidence from thirteen European countries, and compare our results with the target from the Europe 2020 Agenda for achievement in higher education. We show that, with current labor market characteristics, the target set by governments seems compatible with the social surplus maximization objective for some countries, while being too high for other countries. For all countries, maximizing employment would imply higher educational spending than that required for the social surplus to reach its maximum.

Mots clés: Educational policy; Job search; Matching model; Optimal taxation

Domaines: Economies et finances; Gestion et management

Isabelle Lebon, Thérèse Rebière. How many educated workers for your economy? European targets, optimal public spending, and labor market impact. Portuguese Economic Journal, 2018, 17 (1), pp.1-44. ⟨10.1007/s10258-018-0142-8⟩. ⟨halshs-01969719⟩